A Tale Of Two Economies

Companies that make, move or peddle real stuff -- think Alcoa, Walmart, Caterpillar
-- are having a hard time of it lately, mostly because their products and/or
their customers have become commoditized. Aluminum is aluminum wherever it
comes from, cheap Chinese clothes and toys can be had in any discount store,
and earth moving equipment is only in demand when mining is hot. So these companies
and their peers need generally-healthy consumers in order to thrive. And right
now that's not the case.

The story is very different for Big Tech companies riding societal waves that
are independent of trends in GDP, inflation, or consumer spending. They've
created the best versions of things that the whole world wants and because
of this can grow at high rates -- and earn serious money -- regardless of the
state of the economy. Yesterday three of them reported earnings (all articles
from CNBC):

Alphabet, the successor to and new parent company of Google, reported Google's
pre-reorganization third-quarter earnings and revenue results on Thursday.

The company beat on both the top and bottom lines with earnings of $7.35
per share on revenue of $18.68 billion. Analysts had expected Alphabet to
report earnings of about $7.21 per share on $18.53 billion in revenue, according
to a consensus estimate from Thomson Reuters.

Alphabet also announced that its board had authorized a repurchase of up
to $5,099,019,513.59 in Class C capital stock (5.099019514 is the square
root of 26 -- the number of letters in the alphabet). Those shares, trading
under the ticker GOOG, rose more than 11 percent in after-hours trade.

Class A shares in the company, meanwhile, jumped more than 9 percent in
after-hours trading after the results were announced. With a current all-time
high of $713.33, Alphabet shares above $740 would easily beat that record.

Amazon shares spiked Thursday after the high-spending company posted its
second-straight quarterly profit, boosted by strong North American sales
and cloud computing growth.

Amazon reported third-quarter earnings of 17 cents per share on $25.36 billion
in revenue. Analysts expected Amazon to post a loss of 13 cents per share
on $24.91 billion in revenue, according to a consensus estimate from Thomson
Reuters.

Shares rose as much as 11 percent in extended trading. Their after-hours
peak would beat the current all-time high reached in July and would equal
gains of about 100 percent this year. (Click here to follow the stock.)

The technology giant posted earnings of 67 cents per share for the first
quarter of its 2016 fiscal year, on revenue of $21.66 billion. Analysts had
expected Microsoft to deliver quarterly earnings of 59 cents per share on
$21.03 billion in revenue, according to consensus estimates by Thomson Reuters.

Shares were up more than 7 percent in extended-hours trade.

A handful of dominant tech companies won't save us from the financial crisis
that excessive debt and general stupidity will soon bring on. Still, it's fun
to see iconoclasts like Larry Page and Jeff Bezos change the world in mostly
positive ways. And it's instructive to note that they created their companies
here in the US, where some markets are still relatively free.

John Rubino edits DollarCollapse.com and has authored or co-authored five
books, including The Money Bubble: What To Do Before It Pops, Clean
Money: Picking Winners in the Green Tech Boom, The Collapse of the Dollar
and How to Profit From It, and How to Profit from the Coming Real Estate
Bust. After earning a Finance MBA from New York University, he spent the
1980s on Wall Street, as a currency trader, equity analyst and junk bond analyst.
During the 1990s he was a featured columnist with TheStreet.com and a frequent
contributor to Individual Investor, Online Investor, and Consumers Digest,
among many other publications. He now writes for CFA Magazine.